What does compliance risk refer to?

Compliance risk specifically refers to the potential for legal or regulatory sanctions that an organization may face if it fails to adhere to applicable laws, regulations, and internal policies. Organizations are required to comply with various legal standards that govern their operations, and any failure to do so can result in penalties, fines, and damage to reputation.

Understanding compliance risk is crucial for effective risk management, as it helps organizations identify areas where they may be vulnerable to legal issues and develop strategies to mitigate those risks. This can include ensuring that company policies are updated regularly to reflect changes in laws, providing training to employees about compliance requirements, and implementing internal controls designed to monitor compliance.

The other options pertain to different forms of risk. For example, failing to meet performance targets is related to operational risk, while injuries to employees refer to health and safety risks. Risks arising from technology changes typically involve strategic or operational considerations rather than compliance per se. Thus, the interpretation of compliance risk as being primarily associated with legal and regulatory adherence gives B its accuracy.